Category Archives: Economics

France: Le Pen’s been beaten – so what now?

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The majority of French voters have rejected Marine Le Pen. That’s the good news. The bad news is that the elected president is a free-market fanatic whose programme inspired a record number of people to cast blank votes.

Election posters in Champigny-sur-Marne on 7 May 2017 Photo: Tony Cross

Had Le Pen won the presidency, another country would have succumbed to the revamped right-wing populism represented by Trump, Putin, Erdogan, Orban and Brexit – not fascism, in my view, but a new kind of majoritarian authoritarianism endorsed by popular mandate, fuelled by fear of the future and resentment of the establishment, finding its expression in xenophobia and prejudice.

Emmanuel Macron could hardly be styled a courageous defender of minorities but he did resist Le Pen’s racism in the campaign TV debates, which is more than can be said for the mainstream right candidate François Fillon and, for that matter, more than can be said for Socialist prime minister Manuel Valls while in office.

So we’ve escaped a national-level version of the discrimination, repression and racist rabble-rousing the far right has let loose on the towns it controls. And Le Pen’s National Front (FN) seems to have big problems ahead.

Crisis for National Front

The result, and Le Pen’s disastrous performance in the few days before the poll, appears to have plunged the FN into crisis.

In one sense, they don’t have so much to complain about. They achieved a record 10.6 million votes, nearly double their score when Marine’s dad, Jean-Marie, made it to the second round against Jacques Chirac 2002. That’s a lot of Islamophobes – or, at least, a lot of people prepared to go along with the FN’s hatred of Muslims, immigrants, Roma and other minorities to poke the “elite” in the eye, which should, but won’t, give the “elite” pause for thought.

But, and this is really worrying, they could have done even better.

Le Pen ran an effective campaign up until the last few days. Then she had the bright idea of picking a holocaust-doubter as her party’s interim president (he also thought that beating up commies was a good political education but that received less media attention) say that France was not responsible for the wartime rounding up of Jews, call Fillon and his party “shits” (the FN claims she just said they were in the shit) and, worst of all, behave just like her father’s daughter during the crucial final TV debate.

The debate performance – where she was caught out lying, blustered, bullied, slouched and grimaced like the chip off the old block she is – has probably destroyed the “dedemonisation” strategy that had been working pretty well for Marine and her pals.

The FN’s canal historique is already sharpening its knives. Its best-known representative, Marion Maréchal Le Pen, one of only two FN-affiliated MPs at the moment, said on Sunday evening that the party must consider its strategy in the election after the “disappointment”.

And, if reports are to be believed, the rank and file is in disarray. An anonymous FN official told the Mediapart website that a the party’s post-debate postbag contained a number of torn-up membership.  And the “fachosphere” – the far-right social media network – is full of recriminations, mostly against Marine Le Pen and Florian Philippot, the FN vice-president who’s seen as the Svengali behind the dedemonisation strategy and the party’s “social” turn.

One is tempted to ask whether Le Pen threw the debate deliberately. As a Trump admirer, she must have read his comment that leading a country is harder than he’d thought. Being the party of mean-minded, resentful opposition has been a profitable business for her family, making them millionaires. Had the FN watered down its opposition to the EU, the real point of difference with the Fillons, Sarkozys and other tough guys of the mainstream right, it could have undergone the same transformation as Italy’s MSI and joined a coalition government some years ago.

But no, the FN leaders were riding a wave of anti-establishment resentment mixed with xenophobia and seemed genuinely to believe they were on the road to power on their own terms. Hence the disappointment today.

It remains to be seen if the backbiting will hamper their campaign in June’s parliamentary elections. A good result there could staunch the crisis.

Macron and extremes

Something else revealed in that TV debate is that Macron is not a very skilful politician.

He’s an intelligent man, a skilled technocrat who knows his facts.

But Le Pen destroyed herself, he didn’t destroy her.

When she posed as a defender of gay and women’s rights during an attack on a Muslim group that supported him, he failed to remind her of her own party’s record on those questions – the potential for mockery was great but Macron doesn’t do funny. When she justified her claim that the wartime deportation of Jews was not France’s responsibility but that of the Vichy government, he let it go without even a mention the former collaborators who helped found the party. Apparently, he also doesn’t do history.

This is not just a historical quibble. Obscuring the party’s Nazi origins and airbrushing out its anti-Semitism are a key part of the dedemonisation strategy and Macron passed on an opportunity to deal it a powerful blow.

In short, Macron has no political culture, which is also the problem of his newly founded En Marche ! movement. Apparently, the political experience that his presidential campaign lacked was made up for by Socialist Party traitors, working against their own candidate, Benoît Macron, in the first round and even more openly for a republican front – nominally anti-fascist but in reality more pro-Brussels – in the second round.

That was also apparent in his speech after the result was announced. In what he imagined was an olive branch to supporters of Le Pen and left-winger Jean-Luc Mélenchon, he told them they had voted for “extremists”.

Repeating the old canard of the “extremes” meeting up is hardly a way to win over the seven million who voted Mélenchon in the first round and Macron’s assurance that he understood voters’ “anger, anxiety and doubts” is undermined by his obvious lack of empathy with ordinary people on the campaign trail.

With 25 percent abstention, the highest since 1969 when France’s youth was radicalised by May ’68, and an absolute record of four million blank votes, Macron can expect trouble.

His programme, for the most part a collection of micro-measures and expressions of good intentions, is ardently pro-EU and pro-capitalist. Despite a promise to revive Europe’s connection with “the people”, Macron is determined to press on with reducing the debt through austerity, the very policy that has done so much to help demagogues like Le Pen. On the economy it’s more of the same – tax cuts and subsidies for employers, in the desperate and so far unrewarded hope that they will be bribed to invest, longer hours, later retirement and less social protection for employees.

He has promised to bring in more changes to labour law in the summer, his main proposal being to encourage company-level negotiations on working hours and other conditions, a further undermining of collective bargaining and trade union solidarity.

Mélenchon’s seven million votes mean that, for the first time for years, the left is not demoralised.

Rather it is in combative mood, witness all those blank votes. So strikes, demonstrations and social upheaval are guaranteed, indeed the first took place on the afternoon after the election.

Parliamentary elections – who know what will happen?

It’s all very well winning the presidency but afterwards you have to form a government.

For someone who doesn’t actually have a real party that’s a problem.

And, with the mainstream parties rejected by voters in the presidential election, everything’s up for grabs in June’s parliamentary election.

Will Macron succeed in destroying the Socialist Party, as seems to be his intention, with his assurance that En Marche ! won’t endorse any candidate standing under another party’s colours?

Will the mainstream right Republicans lose their more liberal MPs, tempted by the prospect of ministerial positions?

Will voters be as ready to reject sitting MPs as they were to turn their backs on their parties’ candidates in the presidential first round?

Will the FN pick up MPs in some of the 95 constituencies where Le Pen won more than 30 percent in that round?

Can Mélenchon and his allies build on the presidential campaign success and win more seats?

I don’t know the answers to these questions and I don’t think anyone else does, either.

Which means that the parliamentary poll is going to be another cliffhanger and, whatever happens, French politics will never be the same again.

Read my analysis of the result for RFI English here

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Record French tax haul shows how much corporate tax dodgers cost us all

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French tax services netted a record 21.2 billion euros from tax dodgers last year. And the biggest culprit was big business, a result that should lead the government to dissolve the units responsible since, like most governments nowadays, practically its sole job-creation strategy is to let companies off paying their fiscal share.

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France’s Economy Ministry Photo: Pline/Open access

More than a quarter of the tax-evasion haul – 5.8 billion euros – came from corporate tax fraud, up from 4.2 billion euros in 2014.

Individual tax-dodgers with secret bank accounts abroad, no doubt panicked by Luxleaks and the UBS investigation, fessed up to the tune of 2.65 billion euros.

“We have to lay to rest this idea that income from tax inspection comes from hammering small taxpayers,” Budget Minister Christian Eckert pointed out in a rare counter to the right-wing – sorry, “centrist” in establishment-speak – offensive against the state collecting its due. “It’s not true! Income from tax inspection comes essentially from big companies.”

The indiscreet junior minister probably won’t keep job for long if he carries on in that vein.

Because France’s Socialist government has pursued an energetic policy of cutting taxes to business, on the pretext that boosting profits will persuade bosses to take on more workers, with only a minor deviation this year in the form of a labour law pretty much drafted by the Medef bosses’ union.

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The share of dividends in French companies’ operation profits

It’s a strategy that has proved startlingly unsuccessful. Unemployment remains at 10 per cent as companies have paid out the tax handouts in dividends, an international tendency to short-term gluttony that is particularly virulent in France.

Given that the 2014 Socialist government contained no fewer than eight millionaires, one can imagine that it feels more collective empathy towards those struggling to maximise their wealth than those struggling to survive on the breadline – even if the cabinet’s net worth must have taken a hit with the departure of the fabulously wealthy Laurent Fabius.

So the DVNI, the division responsible for chasing up companies with a turnover of more than 154.2 million euros at whose headquarters Eckert and Finance Minister Michel Sapin announced the good tax news, would be foolish to aspire to longevity.

If we follow the government’s logic, following the current economic orthodoxy, it should be closed down and those companies allowed to carry on fiddling their tax returns in the hope that they will be kind enough to employ a few more members of the lower orders with the gains made from their accountants’ creativity.

Indeed, the tax windfall, which has been one of the only positive contributions to the EU-ordered effort to reduce the deficit, seems to have been pretty much an accident.

The unit to pursue holders of secret foreign accounts was set up after budget minister Jérôme Cahuzac was found to be guilty of that very offence and forced to resign. His case opened last month and, the defendant having arrived lawyered up, been put off until September.

Successful though the tax inspectors have been, unions have complained that they could do better with more resources.

That’s certainly true if estimates of the level of tax fraud quoted by the ministry are true. They put the figure at 60-80 billion euros, so 20 billion should be just the beginning if ministers were serious about tackling white-collar crime.

Eckert’s statement is important – and not just in France – because campaigning against taxation has been the right’s most effective weapon in winning middle and working-class support for policies that have actually shifted wealth away from most of the population.

Tax is the Achilles’ heel of collectivism. Most of us want good public services but we’d all rather somebody else pay for them. At the very least, we’ll take any opportunity to reduce the amount of tax we personally have to pay. The right has played on that conflict between immediate individual interest and delayed collective gratification with enormous success.

An important component of most right-wing campaigning issues – benefits fraud, migrants, “wasteful” public spending – is an appeal to the wallet. And, although there seems to be growing scepticism about capitalism and a revival of some form of collectivism among the young, Donald Trump, or France’s Front National, are evidence of the kind of mass reactionary movements that will be whipped up and manipulated if the interests of the wealthy are ever seriously challenged.

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Corbyn’s election sends British right wing back to the 1980s, can his supporters resist?

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Jeremy Corbyn’s victory has annoyed all the right people (pun intended). It’s back to the 1980s so far as abuse and distortion are concerned. So, how loony is the left? And can Corbyn’s supporters defend him against dirty tricks and hate campaigns?

1919-affiche-comment-voter-contre-le-bolchevisme-c054d
How can you vote against Bolshevism?” A French anti-communist poster from 1919, probably not featuring a vegetarian
  • Better the 1980s than the 1890s: George Osborne – and the Little-Sir-Echos in the media and the Labour Party – are worried – or happy, the Tories can’t decide on the line on this one – that Jeremy Corbyn will drag Labour back to the 1980s. This is a bit rich, coming from someone who is dragging Britain back to the levels of inequality of the 19th century, George. And, as I remember it, the worst thing about the 1980s was that your lot were in charge.
  • Corbyn’s candidature dragged the media back to the 1980s. The people who don’t want Labour to go back to the 1980s are busy dusting off the terms of abuse that graced the headlines of that very decade, “loony left” for example. But what was so loony about the left? As I remember it, the tabloids’ main targets were feminism, gay rights, anti-racism and talking to Sinn Fein in Northern Ireland, most of which look pretty mainstream now. Another fine journalistic practise that is getting a lot of mileage at the moment – although, to be fair, it never exactly went out of fashion – is distorting what your subject says and stands for.
  • The people who said Corbyn could not be elected Labour leader now say he can’t win a general election. Have you no shame? You got it wrong. Time for a rethink, not another piece of pro-big business propaganda disguised as analysis. Hey, look! A Sky (!) poll shows he was the most popular of the candidates among the general public and “his left wing policies are also not necessarily as unpopular as many might believe” (they left out the “want to” there, for some reason).
  • Corbyn’s programme is not all that radical. Corbyn may be the most left-wing Labour leader ever, as Tariq Ali argues, but that’s mainly because of his foreign policy. On domestic policy it’s not exactly storming heaven. I was distracted from my work the other day by a lady from the Bloombergs agency explaining on one of those irritating BBC panel shows that advocating renationalisation of the railways would consign Labour to some circle or other of economists’ hell. But we did it before, Madam, and it wasn’t accompanied by red terror nor did it lead to economic collapse. How will it be paid for, she asked. Well, perhaps by savings on scrapping Trident – Oh sorry, it’s unrealistic not to spend billions on that – or by making Bloomberg subscribers and other top earners pay their fair whack in tax.  People’s quantitative easing seems consistent with what Thomas Piketty argues and everyone thinks he’s wonderful, except for the Financial Times on alternate days. Raising the minimum wage? The president of the United States wants that to happen in his country – but then he’s a Muslim socialist born in Kenya, so what does he know?
  • Corbyn owes much of his victory to social media but can social media defend him? Hoist by their own primaries petard, Labour’s right wing are already plotting to reverse the party’s left turn by any means necessary.  A key factor in mobilising for Corbyn was social media, whose echo-chamber effect allows us to consort with the like-minded, reinforcing our views/prejudices and giving us a feeling of power in the numbers, one of the functions of the revolutionary party, if I recall my Lenin. But the social media is also physically isolated, indulging his or her pleasure from home, the workplace or on public transport with headphones clamped to ears. Will the three-pounders or even many of the new party members be prepared to trudge along to monthly party branch meetings, be delegates to constituency parties, conferences etc so as to stop right-wing dirty tricks and ensure that the party’s policies align with those of its leader? Of course, I’m biased. I was expelled from Labour in the 80s. It was quite a relief, to be honest.
  • Corbynmania was in part a revolt against how democracy works but is there a viable alternative? Some 251,000 people, many of them never involved in politics before, rejected their betters’ advice and voted for Corbyn. Why? Many were young people feeling the effects of austerity and disillusioned with post-2008 capitalism. Many responded to a glimmer of integrity in the sewer of modern politics. And many were reacting against the cynical consumerist strategies that were the Blairites’ only principles but are to some extent inherent to parliamentary democracy, which is not government by the people, for the people but the people choosing who will govern them as a globalised capitalism decides the most important aspects of their lives.  Syriza had a mandate to change this but failed.  Admittedly, there are only 11 million Greeks but do 64 million Brits – or that proportion who want a change – have the power or the structures to impose it?
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The Greek debacle and the education of Yanis Varoufakis

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Yanis_Varoufakis_Subversive_interview_2013_cropped
Yanis Varoufakis Photo: Public domain/Yanis Varoufakis Subversive interview 2013 cropped.jpg

I don’t want to sound patronising here, Yanis Varoufakis certainly has more academic qualifications than me and could undoubtedly teach me a thing or two about economics, but it does seem that his time as a minister has been an education for him in politics, the nature and art of negotiation and the ruthlessness of the establishment.

Understandably, Varoufakis seems to be in a sour mood after his experience of negotiating with the EU, the IMF and Wolfgang Schäuble. He voted against the austerity package accepted by Alexis Tsipras and is now merrily spilling the beans about an alleged Syriza Plan B for handling being squeezed out of the eurozone, the unpleasant odours that haunt the corridors of power and Schäuble’s apparent intention to make Grexit a reality.

His efforts to explain to EU leaders that their own policies are damaging the EU and capitalism itself appear not to have been appreciated, as he told the New Statesman:

“ … there was point blank refusal to engage in economic arguments. Point blank. You put forward an argument that you’ve really worked on, to make sure it’s logically coherent, and you’re just faced with blank stares. It is as if you haven’t spoken. What you say is independent of what they say. You might as well have sung the Swedish national anthem – you’d have got the same reply.”

But why did he imagine it would be any other way?

Forgive me for saying so, Professor, but you were naïve. These people already know the arguments and have decided that they are of no use to them.

Some – Schäuble, Tusk – appear to be ideologically committed to austerity, perhaps due to a sentimental attachment to the idea of the lower orders suffering or perhaps because of their political, personal or family histories.

Others have built careers in the service of an establishment that is becoming increasingly addicted to short-term financial returns, big dividends, not paying taxes and slashing waste, ie what’s left of the welfare state.

They don’t want to listen to the opposing case and explaining that case was not relevant to negotiation over Greece’s debt.

In the long run, austerity means that the EU, and eventually capitalism, will eat itself.

But – and for anyone who’s read previous relevant posts on my blog may find I sound a bit Johnny One Note here – the restraints on their short-termism have gone. These were essentially a powerful labour movement and, even more importantly in my view, a competing social system in the form of the Soviet bloc. They no longer exist, so the capitalist class no longer accepts that the state disciplines its need for higher and higher returns in the briefest delays possible.

Negotiation is not about persuading your opponents of the correctness of your case, it’s about convincing them that they have something to lose by not accepting your demands or at least reaching compromise.

That’s why I was amazed when the Syriza leaders declared that they would not leave the eurozone or accept loans from Russia.

Whether you intend to do it or not, why rule out a course of action that could frighten some of the people on the opposite side of the table (although not Schäuble in the first case, apparently)?

Equally puzzling was the Syriza leadership’s acceptance of France’s “help” in drawing up its final proposals (after Varoufakis’s resignation).

The French government and the civil servants it deployed to look over the Greeks’ shoulders may not want a Grexit but they have enthusiastically applied austerity policies and seem to have had a major role in drafting a swingeing package for Greece.

While the negotiations were going on, someone suggested to me that Schäuble was playing hard cop to allow Angela Merkel to look like the soft cop. Not a good comparison. Angela was quite hard enough. Wolfgang was more like the cop applies electrodes to your genitals.

The French Socialist leaders were the soft cops, with President François Hollande apparently on the phone to the Greeks and the Germans continuously in the run-up to the last deal and, in the end, they managed to thrust their package down the Greeks’ throats.

Oh well! At least the Syriza leaders showed that politicians don’t have to wear ties.

Ties are the sartorial descendants of a scrap of material that knights used to wear to stop their breastplates rubbing against their necks. Whether the big swinging dicks in the boardrooms and ministries like it or not, we don’t wear armour any more, so ties are pointless.

That’s a tiny victory, I suppose.

I’m off to Greece this week. So more on the blog later.

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Beware Greeks bearing ballot boxes

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800px-Laocoon_Pio-Clementino_Inv1059-1064-1067
Laocoon Photo: Marie-Lan Nguyen/Public domain

Whether you agree with the result or not, the massive No vote in Sunday’s Greek referendum was a courageous choice. Nobody knows what will happen now – not the Greeks, not the troika … not even Angela Merkel. The majority of Greeks chose to risk more economic hardship rather than willingly undergo further humiliation at the Eurobullies’ hands. A few observations:

  • The Greeks said no to do-as-I-say-not-as-I-do:  Jean-Claude Juncker and Christine Lagarde told them they were naughty not to have paid their taxes. He was finance minister and then prime minister of a tax haven from 1989 to 2013. Being employed by the IMF, she doesn’t pay taxes anywhere (as was, of course, also the case for her predecessor, the delightful DSK). I don’t think that any of us could swear, hand on heart, that we would insist on our contract being rewritten if offered tax exemption but why exactly do international pontificators on fiscal rigour have this status?
  • European unity is good … but at what price? I have to admit to a sentimental attachment to the European Union and the euro. Being able to travel across most of a continent without showing my passport or changing my money is a pleasing taste of a world without national borders. But how many Greeks should be made unemployed, have their pensions slashed or otherwise reduced to penury to afford me that pleasure?
  • Europe would look pretty stupid without Greece: Juncker and friends said that the Greeks were voting on whether to stay in the euro and maybe the EU. Grexit would be a big blow to the euro project but they may be ready to accept it for the sake of an example to the other southern European slackers. But what will become of all those speeches about Europe’s heritage and values if the country that gave us the words “democracy”, “philosophy” – not to mention “poliics”, “comedy” and “drama” – is no longer part of our Europe? What has Luxembourg’s contribution to our common culture been, remind me?
  • Opinion polls are crap: Thank God I resisted the temptation to write a headline about Yes and No being neck and neck on RFI’s website on Saturday following the last poll, which showed the Yes winning with 41.5% against 40.2% for the No.  This is not the first time the pollsters have been spectacularly wrong or that partisan media and interested parties have tried to influence the result by seizing on the prediction that serves their purpose. What happened? Were those canny Greeks also plotting their revenge on pollsters, journalists and EU chiefs by lying about their real intentions? Of course, even if the pollsters are genuinely trying to get it right, they can’t avoid the fact that being polled is passive and going to vote is active. They include in their calculations the responses of people who won’t be arsed to go and vote, whose opinion, quite rightly, isn’t taken into account in a real democratic process. But still we write articles based on one poll as if it was a factual account of the public’s mood and politicians allow their results to influence policy. I think we do have enough evidence to say that François Hollande is not very popular in France at the moment but can we really be sure that 51% of French people don’t think very highly of Alexis Tsipras on the basis of one poll?
  • This is the beginning of an era of austerity, not the end: Austerity doesn’t deliver what’s promised and depresses demand, thus further damaging the economy. But the IMF, the EU and the German leadership have turned down Yanis Varoufakis’s kind offer to save capitalism from itself. Electoral considerations come into this for Merkel, although, as George Papandreou showed when he resigned as Greek PM, an establishment politician is prepared to fall on his sword for the greater bourgeois good if bullied enough. Please read my previous post Austerity the new  normal on why I believe that the changes in the structure of the working class and the collapse of the Soviet bloc have lifted the restraints on unbridled capitalist accumulation and are likely to lead to all the social reforms of the 20th century being “reformed” away.
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Pursuing tax-dodgers , even half-heartedly, nets France 20bn euros for France

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Toads of property, George Grosz

As I’ve just reported in a much-tweeted story on RFI’s website, the French government collected a record 19.3bn euros from tax dodgers in 2014, up from 18bn in 2013, and it expects to collect even more in 2015.

The government is claiming the credit for its anti-tax-dodging drive but there were earlier reports of people in that department complaining that they were understaffed, particularly given the number of tax avoiders who have come forward following the Swissleaks and Luxleaks revelations, and could collect far more.

Panic seems to have seized certain members of the accumulating classes, inspiring an unprecedented outbreak of honesty.

Unless I’m mistaken, the Greek government’s proposal to chase up tax dodgers has been pretty much pooh-poohed by the EU, IMF and other negotiators, for whom making the poor suffer seems to be a matter of principle – see my post Austerity the new normal, which also goes into the French experience and ventures an explanation as to why this is going to carry on indefinitely.

The French government is by no means evangelical about pursuing tax avoidance. Many of its “Socialist” members are millionaires and one was found to have a secret Swiss bank account (and to have consorted with fascists at various points in his career).

Anyone tempted to soap the rope for benefits scroungers might like to know that pursuing social security fraud, including employers’ unpaid contributions, only netted the French government 852.6 million euros.

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Why the US will start a war with China (perhaps)

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La_bataille_de_Palikiao
The Battle of Palikiao (Baliqiao), 21 December 1860 during the Second Opium War (1856-1860), Emile Bayard

In my first post on this blog I predicted that the US will one day provoke a war with China in an attempt to maintain its global hegemony. The formulation was deliberately provocative and, of the three reasons to be pessimistic about the future that I outlined, it has provoked the most scepticism, both on Facebook and to my own, physical face, although not, unfortunately, in comments on the blog (hint, hint).

For the last couple of years I’ve asked my students at Paris 13 University to debate this question. It’s always difficult to find someone to support the proposition and at the end the vote against is overwhelming.

They put forward plenty of good arguments against. But I think there are also strong arguments for and perhaps a tendency to think that it won’t happen simply because we really don’t want it to.

Here’s the strongest argument for a decisive confrontation between the US and China:

GDP WOrld

The World Bank predicts that China will be the world economy’s top dog by 2050 … and that by a very long way.

Chinese growth has averaged 10% for the last 30 years and, although it’s slowing down, it will continue to outstrip the older-established industrial economies unless there is a sudden and dramatic reversal of fortunes.

The US is losing its economic hegemony of the planet and, although the Chinese leadership appears to have no aspirations to global political or military hegemony at the moment, I don’t see how Washington can keep hold of the latter if it ceases to have the former.

We’re witnessing the decline of an empire and that is never a peaceful process.

The US has reacted to the decline in its economic status in time-honoured fashion – competing with China economically with the creation of a free-trade partnership around the Pacific, recruiting “allies” that it hopes will be dependent on its support in the region and encircling China with military bases, some equipped with troops and boats, others with drones.

Here’s the US-initiated Trans-Pacific Partnership – countries in dark green are already members, those in light green have expressed an interest, those in blue, according to the designers, are potential future members (China – really?).

TPP
Graphic: Public domain/ “TPP enlargement” by en:User:Japinderum, en:User:Phospheros, en:User:Orser67 – en:File:TPP enlargement.png (based on File:World map model.png). Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:TPP_enlargement.png#/media/File:TPP_enlargement.png

If all goes as planned, the US will have sewn up a trading partnership across what Washington now regards as the “centre of gravity” of world economic activity, an area that produces 60 per cent of the world’s GDP and represents half of world trade – “a posse to get China,” according to Sydney Morning Herald editor Peter Hartcher.

But, of course, Washington knows that it can’t prevent its new friends dallying with China economically – Taiwan thinks it’s the real Republic of China but that hasn’t stopped its capitalists taking the plane to the People’s Republic (PRC) for self-enrichment purposes. No more can US companies afford to renounce doing business with Beijing.

In 2011 on a visit to Australia Barack Obama announced a “pivot to Asia”.

It hasn’t quite gone as planned, what with the hoped-for disengagement from the Middle East and Afghanistan proving more difficult than Washington’s finest minds imagined.

Nevertheless, there has been a frantic diplomatic offensive, which has involved bringing Myanmar/Burma out of the cold, sucking up to India’s Narendra Modi and cultivating every country that has a territorial bone to pick with China, which just happens to be every one of its neighbours to the east and south.

Here are the principal points of friction in the South China Sea:

  • The Spratley Islands,which are rich fishing grounds and, probably,have significant oil and natural gas reserves, are claimed in part or entirely bythe PRC, Vietnam, Malaysia, the Philippines, Brunei and Taiwan, all of whom, apart from Brunei, have military forces on one or more of the otherwise uninhabited rocks;
  • The Paracelislands, more good fishing and probable oil and gas, are controlled by the PRC but claimed by Vietnam and Taiwan;
  • The Senkaku/Diaoyuislands, more rocks with fishing, oil and shipping lanes, controlled by Japan but claimed by the PRC and Taiwan; Things got nasty in 2012-13 when Japan bought three of the islands from a “private owner”, sparking demonstrations in China, and the PRC declared an east China Sea flight identification zone; A US-Japan security treaty obliges the US to intervene in case of threat to Japan’s sovereignty over the islands;
  • Japan – a lot of history here, as with the rest of east Asia, and a focus for Chinese nationalism, which sometimes threatens to escape Chinese Communist Party control; Right-wing Prime Minister Shinzo Abe is an aggressive nationalist who wants to renounce Japan’s post-war limits on its military role – he has increased defence spending, created a new national security council and beefed up alliances with neighbouring countries.
  • Taiwan, like the People’s Republic, claims the right to control the whole South China Sea; it a
  • lso claims to be the official government of all China, although that policy is the subject of much political controversy, while the PRC claims that Taiwan is part of its territory and 2,000 missiles pointed at the island. In 2011 the US agreed to a US$5 billion upgrade to Taiwan’s F-16 military airplanes.

No-one’s going to be short of a casus belli here.

Now it so happens that one-third of the world’s maritime trade and half its traffic in oil and gas takes place in the region and major petroleum and other mineral deposits are believed to lie beneath the seabed.

The US, through its navy and its allies hopes to have a stranglehold on virtually all of China’s oil supply through control of the South China Sea and the Straits of Malacca,  one reason, perhaps, for Beijing’s relatively good record of investment in renewable energy  but also for its antsiness when it comes to islands near shipping lanes.

So, although the Chinese leadership may not aspire to world hegemony, it very definitely wants hegemony of east Asia, especially the South China Sea.

And the US definitely doesn’t want that, witness the map of US bases in the region, now featuring new, added US troops in Australia:

US bases s ch sea

Of course, there are plenty of US troops to the west of China, too, notably in Afghanistan – albeit in reduced numbers – and Kyrgyzstan.

However, as historian Alfred McCoy points out, China seems to be in the process of outmanoeuvring the US by extending its influence westwards, with an ambitious network of transport and pipelines. Gas and Oil pipelines will soon link China to the Caspian Sea, via Kazakhstan and Turkmenistan, to the Bay of Bengal and the Arabian Sea and thus to the Gulf via Myanmar and Pakistan, and to Siberia.

 

China transport pipelines
China-Central Asia Infrastructure (doesn’t include Sino-Myanmar pipeline) Source: Stratfor

According to McCoy, China, working with Russia with which it has created a bloc in the Shanghai Cooperation Organisation, is working on the domination of “Eurasia”, the land mass that strategists have for over a century regarded as key to world domination.

Now, the US may not have colonies but insofar as it imposes its will on the whole world it is an empire, the most powerful empire in history.

And the economic predictions show that that empire is now on the decline, for a loss of military and political hegemony must surely follow a loss of economic hegemony, even if the speed of that process is open to question.

In general empires don’t bow out peacefully.  After two world wars and a wave of colonial revolts, the European empires did give up without a confrontation with their successor, choosing, especially in the case of the UK, to tag onto Washington’s coattails.

But is there any likelihood of the US agreeing to go quietly? Despite not having a war on its own soil for well over a century, it is a militarised society with what is euphemistically called a “defence” budget reaching an enormous  $496 billion for 2015.

That feeds a vast military-industrial complex whose profits largely depend on a permanent war mentality, as do the jobs – 3.6 million, according to interested parties – in the sector.

“Led by Lockheed Martin, the biggest U.S. defense companies are trading at record prices as shareholders reap rewards from escalating military conflicts around the world,” reports the Portland Press Herald.

“As we ramp up our military muscle in the Mideast, there’s a sense that demand for military equipment and weaponry will likely rise,” says Jack Ablin, chief investment officer at Chicago-based BMO Private Bank, who oversees $66 billion including Northrop Grumman and Boeing shares. “To the extent we can shift away from relying on troops and rely more heavily on equipment — that could present an opportunity.”

So much for the material interest. Then there’s ideology and national psychology.

Can any US leader – or even any mainstream American politician – renounce the manifest destiny doctrine? Yet accepting the rise of an equal or greater power means doing just that.

The Tea Party would look like – well, a tea party – compared to the reactionary movement that would be whipped up by shock-jocks, Fox News, the Republican right wing, in response to a president who proposed that the US accept playing second fiddle on the world stage.

And the Democrats are a thoroughly bourgeois party, as committed to the American ideology as the Republicans, while much of the labour movement seems easily recruited to the patriotic cause.

True, large parts of the US economy have everything to lose by upsetting China and the PRC holds about 8.0% of US government debt, not as much as some people seem to believe but still a healthy slice. But is US capital sufficiently united in its interests to drop its pretensions to world domination and rein in the populist right?

US_Public_Debt_proportions_March_2013
http://www.businessinsider.com/chart-us-trade-deficit-with-china-2013-4

Another persuasive argument against starting a war is the nuclear one. But the balance of terror nearly didn’t work during the Cuban missile crisis, can we be sure that it will when the US empire feels itself to be in terminal decline?

Cyberwarfare is also a growing threat to the US. Is that a new balance of terror? Perhaps, but, the way Washington has reacted to it so far, it could also be a casus belli.

Nor can we be sure that China’s ambitions will remain as modest as they are today. Already XI Jinping appears to be more aggressive about his country’s international role than his predecessors and the CCP’s legitimacy is now primarily nationalist. Rank-and-file nationalism could be a strong pressure on the country’s leadership in the event of a confrontation over territorial claims.

And a territorial claim, combined with a stiff dose of rhetoric about human rights and a little bit of imperial-minded racism, could easily provide a pretext for the US becoming involved in a military confrontation, perhaps limited at first but possibly spiralling out of control.

The real reasons for wars are rarely if ever openly declared – a pretext involving much moral indignation and national affront is usual and the US has particularly fine form in this field  – think of the USS Maine in Cuba, the Gulf of Tonkin incident and, as for Iraq, let’s not even go there.

So a scenario of Washington intervening on behalf of one of its clients and the PRC leadership being unable or unwilling to back down on nationalist grounds doesn’t seem so unrealistic to me

I wouldn’t bet the $1.2 trillion of US debt China holds against it.

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Austerity – the new normal

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posadas56_1
José Guadelupe Posada: 20th century Calavera

Greece – is it really about debt?

In January 2015 Greek voters rejected the austerity policies imposed on them for their previous governments’ sin of accumulating billions of euros of debts. Democracy, whose defence is so often evoked as the reason for wars and restrictions of civil liberties, did not prove so dear to European leaders’ hearts when it resulted in the election of a left-wing government in the country of its birth.

The Syriza government has proved not quite as far left as some predicted, ready to negotiate, its ministers assuring their counterparts they don’t want to leave the euro, Finance Minister Yanis Varoufakis telling the world that he wants to save Europe from itself.

But Europe’s leaders, the “moderates” of mainstream-media labelling, have insisted it is austerity or nothing.

After Varoufakis visited the European Central Bank in February, the ECB responded to his conciliatory tone by effectively cutting off Greek banks’ access to short-term loans, doing all it could to bring speedy confrontation.

In March the European Commission opposed the government’s “humanitarian crisis bill”, telling it that helping the poor, the aged and the homeless would be “inconsistent with the commitments made”, as would its proposal to facilitate collection of the country’s massive tax arrears by allowing them to be paid in instalments.

Greek tax evasion is estimated to have been worth 20bn euros a year and has been going on for many decades, so pursuing it should provide a tidy sum for the government – France collected 1.8bn euros in 2014 and expects a further 2.2bn euros in 2015 after a number of tax evaders ‘fessed up, motivated both by the fear of exposure thanks to the Swissleaks revelations and a promise of clemency to those who came forward. It could have been far more since tax collectors complained that they did not have enough staff to deal with all the cases in reasonable time.

But collecting tax dodgers’ cash appears to be a low priority for the ECB, the European Commission and the International Monetary Fund.

The creditors’ conditions “are political”, comments Roman Godin in La Tribune, “the acceptance of ‘reforms’ of the labour market and pensions, which are not urgent economically speaking but which politically ‘cancel out’ the essential points of Syriza’s programme and message”.

Who really believes that Greece can clear its debts if government income is slashed by austerity policies that have led to a 26% fall in production, 26% unemployment and a 33% fall in wages, it is obliged to take out more loans with interest rates attached and, on top of that, it is discouraged from chasing up tax income it is already entitled to?

Anyone would think that for the EU and IMF leaders balancing budgets was less important than destroying what’s left of the welfare state!

French-bashing – the hidden agenda

In France we hear an awful lot about the need to reduce the debt – in fact, it has dictated the Socialist government’s economic policy since its election.

Following the French media is like having a friend who is given to self-flagellating criticism but takes violent exception if you agree with them. On the one hand French commentators get prickly about “French-bashing” (yes, that’s a real Franglais word now), on the other editorialists, analysts, politicians and business leaders insist that the country is locked in a spiral of decline with the working and middle classes frolicking in the sun of unaffordable privilege while employers, big and small, are weighed down by the twin burdens of bureaucracy and taxation.  Adding its voice to the chorus of cutters, the European Commission has ordered the government to slash a budget deficit of 4.3 per cent of GDP in 2014 to 3.0 per cent in 2017, although France has gained no less than three extensions, unlike the poor Greeks.

The Socialist government has obeyed orders, drawing up plans to cut 50 billion euros from public spending over the next three years, on top of previous cuts and rises in VAT.

First among France’s autoflagellants is the main bosses’ organisation, the Medef. Of course, it is not really indulging in self-criticism as much as criticism of the state insofar as it is perceived to be indulging the lower orders. The Medef and its cothinkers latch onto what the French annoyingly call “Anglo-Saxon” critiques of the French economy, defending France from the French-basheurs with about as little enthusiasm as their forerunners defended la patrie at the end of the 1930s. But then patriotism, like taxes, is for the little people.

International comparisons don’t always bear out the image of the French being especially idle or particularly privileged, especially when one takes into account productivity, which in some sectors was actually boosted by bosses compensating for the 35-hour week by investing or changing working practices.

But the really puzzling question, for me at least, is how it is that France can’t afford to pay for improvements in social conditions conceded since the end of World War II when GDP, despite declining in the post-2008 crisis, has not just risen but soared in the past 100 years.

GDP per capita:

graph1

French total GDP in 1950 was 15.5bn euros. In 1990 it was 1 058.6bn and in 2013 it was 2 113.7bn.

Inflation has taken a chunk out of that, of course, but, if I’ve worked the online calculator correctly, 1950’s GDP was 284bn and 1990’s was 1,566bn in 2013 prices. http://france-inflation.com/calculateur_inflation.php. So we are more productive and vastly wealthier than we were 50 years ago, especially if you bear in mind that wealth has not only been created but also accumulated over the years.

True, public spending has risen – from 40% of GDP in 1947 to 56% in 2011. But, although the current crisis has cut government income and increased expenditure by raising unemployment, this is not a result of the government throwing money at the disadvantaged, in fact, according to social campaigners le Collectif pour un audit citoyen de la dette publique (CAC), government spending  has actually fallen two points of GDP over the last 30 years.

Where does the deficit come from?

CAC finds three main causes:

  • Tax cuts – tax breaks, mainly for businesses and top income brackets, have cost the state 488bn euros, reducing its income by five points of GDP, over 30 years;
  • Interest payments – borrowing on financial markets, whose rates have fluctuated violently, has proved 589bn euros more expensive than borrowing from households or banks at a 2.0% interest rate;
  • Tax evasion – if wealthy tax dodgers with secret accounts in tax havens had paid their share the debt would have been 424bn euros lower in 2012, CAC estimates.

CAC cites author Gabriel Zucman’s estimate that tax evasion cost France 17bn euros in 2013. Since then SwissLeaks has shown that HSBC alone helped 3,000 customers hide more than 5.7bn euros in tax havens.

A symptom of France’s unbearable tax burden, perhaps?

Not really, in the tax avoidance stakes the country comes behind Switzerland, the UK, Venezuela and the US, none of whom have higher income tax levels than France – Bolivarist Venezuela actually having the lowest at 34%.

In the space of a few months a total of 180.6bn euros went through HSBC’s Geneva branch to be salted away in tax havens. The money came from all over the world with no apparent correlation between the top rate of income tax and rich people’s inclination to tell the truth to the taxman. The blunt truth is that no matter how much you cut tax, the rich – whether they’re arms traffickers, comedians, politicians, surgeons or heirs to family fortunes – will never be satisfied.

On top of which, they’re  good negotiators – it’s a lot of what bosses do for a living – so they’re unlikely to say “Thanks, guys, that’s enough!”

“As long as you’re winning, keep playing,” comments Luc Peillon in Libération newspaper, when reviewing yet another set of demands put forward by the Medef last year.

Having already won “a historic reduction in labour costs” of 40 billion euros during the life of François Hollande’s government, the bosses’ union drew up a new shopping list that included cutting two public holidays, more exemptions for businesses on taxes and social security contributions, creating a loophole in the minimum wage, extending Sunday working and that old chestnut ending the 35-hour week, all under the pretence that it wants to create jobs.

After examining the Medef’s claim that their proposals would create up to 600,000 jobs, Peillon found that the real figure would be about 30,000. Except it wouldn’t. That last proposal would probably destroy jobs by expanding overtime working rather than creating new employment.

This medicine doesn’t work … have some more!

Given that right-wing parties the world over continually advocate “reducing the tax burden” and supposedly left-wing parties habitually cave in to the demand, you’d think that bribing the bosses to invest has a proven track record of job creation.

Except it hasn’t, has it?

Despite all those billions of give-backs, France now has record unemployment and it has risen even as Hollande’s government signed deal after deal that swapped real tax cuts for hypothetical new jobs.

But in France, as in the rest of the world, the pressure for more tax cuts goes on.  The wealthy are cancelling their subscription to the state, while still calling on its services when they prove useful.

So where has the money gone?

Into investors’ pockets. Dividends have risen from 12-13% of French companies’ operating income in 1980 to 30% in 2013, according to state statistics unit Insee.

graph2

In 2013 the amount of dividends paid out soared by 200bn euros, a documentary by Edouard Perrin on France 2 TV showed.

And whoops! There goes investment (it’s the grey line at the bottom of the graph below profit margins and self-financing rates from 1984 onwards):

graph3

Sums paid in dividends in France were half those invested in 1980. They are 2.5 times more today.

And it’s not just in France. All over the rich world companies are stuffing their shareholders’ pockets as if there were no tomorrow.

“Global dividends soared 10.5% to $1.167 trillion in 2014, a new record,” the Henderson Global Dividend Index (HGDI) reports with considerable satisfaction. “Underlying dividend growth – which adjusts for currency movements, special dividends, the timing of big payments and index changes – was still robust at 8.8%.”

Commenting on the international trend, investment fund boss Larry Fink is shown in Perrin’s documentary, Cash Investigation, warning of a threat to companies’ long-term survival if they carry on as they are now.

Here’s how investments has fared in the US and the UK:

graph4

The pressure to pay out not only means cutting investment in plant but also in training, one of French industry’s real weaknesses. While right-wing economists compare France unfavourably to Germany on many economic fronts, they rarely mention one crucial difference – in 2012 Germany spent 90bn euros on research and development while France could only rustle up 51bn euros.

Maybe French employers should be getting tax breaks for research. Well, actually, they already are. It’s CIR,  the purple line in the graph, produced by the campaign Sciences en marche and it shows that they have pocketed nearly six billion euros this year. The blue line shows the number of jobs created in research. Yes, it’s actually falling as the payouts rise. What a scam!

graph5

And, as Cash Investigation shows with stories of employee suicides, boot-camp-style training programmes and factory closures, human capital is squeezed to boost the bottom line.

This search for immediate financial gratification is all part of the tendency to growing inequality, noted by Occupy campaigners, Russell Brand, Oxfam, Thomas Piketty (I’m on page 183 – apparently better than most ebook readers who don’t seem to have got much past page 26 – how far have you got?) … anyone with eyes to see, really.

According to Piketty, the trend in Europe and America is a reversal of a trend that lasted from 1770 to 1990.

The ideological justification for this, the self-serving greed-is-good rhetoric of the political right, has, as can be seen in the ex-troika’s dealings with Greece, become the dogma of the global elite, whether represented by the “Socialist” Dominique Strauss-Kahn or the Sarkozy-worshipper Christine Lagarde.

Today we see the same tendency to the reduction of public spending, stigmatisation of the poor and their increased impoverishment, rising inequality and a rise in the share taken by profit all over Europe and the US.

All this is accompanied by an ideological war on taxation – coopting the middle and working classes into the destruction of social solidarity – and social engineering – privatisation of social housing and the encouragement of home ownership, employee-shareholder schemes and other forms of non-salary pay, hierarchies in the workplace and career structures that pit workers against each other, all of which have the effect of undermining the concept of the collective.

But an ideology only becomes dominant if it suits those who call the world’s political tune.

The rich are reverting to type because they no longer fear revolution

The limited income redistribution that took place in the 19th and 20th centuries was no more an ideological decision than is its current reversal.

Nor were today’s “democratic values”, living standards and social welfare systems handed down by an enlightened elite, reared on a benign Western cultural tradition, as claimed by the political successors of the men who ordered the troops out at Peterloo, had union organisers murdered in the US, butchered the Paris communards and Lyon’s Canut insurrectionists and embarked on the “civilising mission” of colonialism.

Every social and political advance was bitterly resisted, usually with the same brutality that reappeared in the Thatcher government’s showdown with the British miners in 1984.

The modern social welfare state was the product of class struggle, its precursors created primarily by trade unions and other working-class organisations and adapted to capitalism’s needs when it proved necessary to take the edge of the class struggle.

But, according to Piketty’s graph, all this went into reverse in 1990. Why would that be?

To start with, and I know I’m not the first to say this, the labour movement in Europe and the US isn’t what it used to be.

I live in what used to be known as the ceinture rouge, the red belt around Paris, a bastion of the French Communist Party, whose political and trade union base was to be found in big factories like Renault Billancourt, now closed, its site now apparently destined to become an “isle of all the arts”. The factories are no more, the Communist Party has about 70,000 paid-up members, compared to 800,000 in 1946, and the unions, while still pretty shouty in that famous French way, are divided and weakened.

The British unions are similarly weakened and the Labour Party has had its class content surgically removed – no longer one half of a two-party system that reflected the struggle between capital and labour but a competitor in a political game show with an ever-expanding number of players.

Both in Europe and the US the unions have seen their power greatly diminished. The nature of employment in the most advanced economies has deprived them of the means to inflict serious financial damage on major employers with a few exceptions. The conditions that Marx said made the proletariat the gravediggers of capitalism – the collectivism that arose from the industrial process – have been substantially changed in these countries both by accident and design.

In the US today, according to Piketty, 18% of the workforce is employed in manufacturing and 80% in services, while in France the figures are 21% and 76%. Even if the big shift has been the decline in agricultural employment, manufacturing employment stood at 33% in both the US and France in 1950 and services at 50% and 35% respectively.

Of course, the working class has not been abolished. The “knowledge economy” is a fantasy dreamt up by people who apparently haven’t noticed that they are sitting in glass, concrete and steel offices, typing on computers manufactured from steel, plastic and rare earths. But the proletariat does to a large extent seem to have moved east and, even there, is more dispersed and more at the mercy of the movement of globalised capital than its predecessor of a century ago.

Here’s the trends on a world scale, according to MSS Research:

graph6

And more and more labour is going to be replaced by computerised technology, as John Lanchester indicates in The London Review of Books.  He cites an Oxford University study that estimates that 47% of US jobs are “potentially automatable” . So it’s bye-bye telemarketers, insurance underwriters, mathematical technicians, sewers (hand) and title examiners, abstractors and searchers. It will be mainly low-wage, low-skilled jobs that will go, the study finds.

“So the poor will be hurt, the middle will do slightly better than it has been doing, and the rich – surprise! – will be fine,” comments Lanchester.

Given that Le Monde newspaper recently used a computer programme to produce some of its coverage of departmental election results and that Lanchester himself reproduces an article written entirely by computer, I find his prognosis a trifle optimistic so far as my own trade is concerned and the list of skills that are likely to vanish indicates that the middle is likely to be increasingly squeezed worldwide.

Of course,  the replacement of human labour by machines, the squeezing of wages and the destruction of the welfare state will all vastly reduce markets and be against the long-term interests of capitalism as a system. But those markets were for the most part created by processes that the capitalists themselves resisted, both individually and collectively, and are being destroyed by the immediate concern for the bottom line that is the motor force of private enterprise.

Piketty attributes some of the 20th century’s redistribution of wealth to the effects of two world wars and the 1918 flu epidemic but I doubt if any of us are hoping for similar cataclysms to create labour shortages and disperse inherited wealth.

In my view the key constraint on capital’s unrestrained greed in the 20th century – the principal reason why the welfare state and the social-democratic compromise was conceded – is overlooked or understated by most commentators.

It was fear of revolution.

And, although its full implications are taking time to filter into the bourgeois brain, that fear is no more.

From 1918 to 1989 an alternative economic system to capitalism existed. It turned out not to lead to the liberation of humanity, to put it mildly, but, ironically, it did oblige capitalism to render itself more acceptable.  The US’s propagandists even enrolled abstract expressionism and avant-garde theatre in their efforts to portray the West as the home of freedom but, above all, some of the massive wealth that was being created was invested in providing the mass of the people in the rich, metropolitan democracies with higher living standards than their Russian, east European or Chinese counterparts.

Those days are over. With the collapse of the Soviet bloc and China’s conversion to capitalism there’s no need to do that any more – hence austerity as dogma.

Although the 2008 crash brought an end to the post-1989 ideological euphoria, it has not stopped the austerity onslaught.

And why should it?

Consciously or unconsciously, the ruling elite does not feel that its hold on power is under threat, either ideologically or materially.

So maybe Marx’s theory of increasing misery – of all his predictions the one that seemed to be most definitively disproved by the reality of the 20th century – was not so daft after all.

I hope I’m wrong. If I am, please prove it.

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